Q17. Consider the following statements about Currency Wars:
1. A currency war refers to a situation where a number of nations seek to deliberately depreciate the value of their domestic currencies.
2. Currency wars are also known as competitive devaluations.
Which of the above statements are correct?
c) Both 1 and 2
A currency war refers to a situation where a number of nations seek to deliberately depreciate the value of their domestic currencies in order to stimulate their economies. Although currency depreciation or devaluation is a common occurrence in the foreign exchange market, the hallmark of a currency war is the significant number of nations that may be simultaneously engaged in attempts to devalue their currency at the same time.